A Michigan judge ruled Friday that Republican Gov. Rick Snyder’s Detroit bankruptcy filing is a violation of the state’s constitution and that it fails to “honor” President Barack Obama who “took (Detroit’s auto companies) out of bankruptcy.”
County Circuit Judge Rosemary Aquilina said she hopes Gov. Snyder “reads certain sections of the (Michigan) constitution and reconsiders his actions.”
“I have some very serious concerns because there was this rush to bankruptcy court that didn’t have to occur and shouldn’t have occurred,” Aquilina said.
“Plaintiffs shouldn’t have been blindsided,” and “this process shouldn’t have been ignored.”
Kevyn Orr, Detroit’s state-appointed emergency manager, filed for Chapter 9 protection on Thursday after two municipal pension funds moved to sue him in an attempt to protect retiree benefits.
Currently, both pension funds have claims to roughly “$9.2 billion in unfunded pension and retiree health care liabilities,” the Free Press reports.
The city’s debt and liabilities, Orr notes, could be as much as $20 billion.
State law protects pension benefits from being “diminished,” but filing in federal bankruptcy court takes away those protections.
After both funds moved to sue the emergency manager so at to protect retiree benefits, Orr had no choice but to file for Chapter 9.
“Aquilina’s order will quickly move to the Michigan Court of Appeals to address the state-level legal skirmishing over the Chapter 9 bankruptcy strategy,” the Detroit News reports.
“Union and pension plan-member court maneuvers have the potential to slow down federal bankruptcy proceedings and could land their effort to protect their retirement provisions in federal court,” the report adds.
Gov. Snyder and Orr filed for bankruptcy moments before attorneys representing the pension boards were able to get Aquilina to sign off on a restraining order. The judge was forced to accept the former and deny the later (much to her chagrin).
Before ruling the city’s bankruptcy filing “unconstitutional,” Judge Aquilina criticized Orr and the Snyder administration for outmaneuvering the pension board attorneys.
“It’s cheating, sir, and it’s cheating good people who work,” the judge told assistant Attorney General Brian Devlin. “It’s also not honoring the (United States) president, who took (Detroit’s auto companies) out of bankruptcy.”
Aquilina added later that she would send President Obama a copy of her order.
“I know he’s watching this,” she said.
She added that the “president ultimately will have to take action to make sure existing pension commitments are honored,” the Detroit News.
Union and pension board attorneys say the city needs to find a way to take pension plans out of the restructuring negotiations.
Attorney General Bill Schuette, on behalf of Snyder, filed an application for Appeals Court consideration of the order after Aquilina’s ruling was issued Friday, the Detroit News notes.
“Schuette asked the Appeals Court to put a hold on present and future lower-court proceedings until his appeal is decided,” it adds. “He planned to seek emergency consideration to expedite the process.”
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